UCB Savings Account with FD Interest Credit: Not Inoperative
Current · Source: Reserve Bank of India · RBI/2009-10/211 · issued 09 Nov 2009 · ~1 min read
Quick answerRBI clarifies that a savings account receiving periodic FD interest credits per customer mandate remains operative. It becomes inoperative only after two years from the date of the last such interest credit. This settles classification doubts for UCBs.
The rule, in the simplest words
If a savings account only gets interest from a fixed deposit (a type of bank savings plan) because the customer asked for it, the account is still 'operative' (working and active).
The bank must count that interest credit as a 'customer-induced transaction' (something the customer caused to happen), so the account stays active.
The savings account becomes 'inoperative' (stops being active) only after two years from the last time that interest was added.
Banks should not mark such accounts as 'inoperative' just because no other transactions happen, and they must track the date of the last interest credit.
How it plays out — a real example
A co-operative bank branch officer in Indore reviews Mrs. Sharma's savings account, which only receives quarterly interest from her fixed deposit as per her mandate. He notes the last interest credit was 18 months ago, so he correctly keeps the account marked as operative, knowing it won't become inoperative until two years after that date.
What changed
RBI clarified that crediting FD interest to a savings account per customer mandate counts as a customer-induced transaction. Such savings accounts stay operative as long as these credits occur. They become inoperative only after two years from the date of the last interest credit entry.
What it means for you
UCBs must not classify savings accounts as inoperative solely because the only activity is FD interest credits per mandate. This preserves account status and avoids premature reporting as unclaimed deposits. Banks need to track the date of the last interest credit to correctly apply the two-year inoperative clock.
What you must do
Review savings accounts where the only transaction is FD interest credits per customer mandate and ensure they are not marked inoperative.
Update your system to treat such interest credits as customer-induced transactions for inoperative account classification.
Set a two-year countdown from the date of the last FD interest credit before marking such accounts as inoperative.
Train staff on this clarification to avoid misclassification and regulatory non-compliance.
Who it affects
Primary (Urban) Co-operative Banks, UCB operations and compliance teams, UCB deposit account holders with linked FD interest mandates
❓ Common questions
What counts as a customer-induced transaction for inoperative account classification?
Any debit or credit transaction initiated by the customer or at their instance, including a mandate to credit FD interest to a savings account, is customer-induced.
When does a savings account with only FD interest credits become inoperative?
It becomes inoperative two years after the last credit entry of FD interest. As long as interest is credited periodically, the account remains operative.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/211
UBD.BPD (PCB) Cir No19 /13.01.000/2009-10
November 9, 2009
Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Dear Sir
Unclaimed Deposits and Inoperative/ Dormant Accounts in UCBs
Please refer to our circular UBD.No.DS.PCB.Cir.9/13.01.00/2008-2009 dated September 01, 2008 on captioned subject. In terms of para 2 (vi) of the circular, for the purpose of classifying an account as 'inoperative', debit as well as credit transactions induced at the instance of customers as well as third party should be considered.
2. There may be instances where the customer has given a mandate for crediting the interest on Fixed Deposit account to the Savings Bank account and there are no other operations in the Savings Bank account. Some doubts have arisen whether such an account is to be treated as inoperative account after two years.
3. In this connection, we clarify that since the interest on Fixed Deposit account is credited to the Savings Bank accounts as per the mandate of the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account is credited to the Savings Bank account. The Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the interest on Fixed Deposit account.
Yours faithfully,
(A.K. Khound)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/211 · issued 09 Nov 2009. The plain-English explanation above is BankPulse’s own independent summary.
Update your system to treat such interest credits as customer-induced transactions for inoperative account classification.
📜 Compliance
Review savings accounts where the only transaction is FD interest credits per customer mandate and ensure they are not marked inoperative.
Set a two-year countdown from the date of the last FD interest credit before marking such accounts as inoperative.
Train staff on this clarification to avoid misclassification and regulatory non-compliance.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (Primary (Urban) Co-operative Banks, UCB operations and compliance teams, UCB deposit account holders with linked FD interest mandates), your first concrete step on “UCB Savings Account with FD Interest Credit: Not Inoperative” is: “Review savings accounts where the only transaction is FD interest credits per customer mandate and ensure they are not marked inoperative.” (RBI issued this 09 Nov 2009).
Circular: RBI/2009-10/211 -- UCB Savings Account with FD Interest Credit: Not Inoperative
Issued: 09 Nov 2009
Action required: Review savings accounts where the only transaction is FD interest credits per customer mandate and ensure they are not marked inoperative.
Action required: Update your system to treat such interest credits as customer-induced transactions for inoperative account classification.
Action required: Set a two-year countdown from the date of the last FD interest credit before marking such accounts as inoperative.
Action required: Train staff on this clarification to avoid misclassification and regulatory non-compliance.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5351&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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